Understanding Personal Finances – Fall 2024
To get a deduction for charitable giving, you must itemize deductions on your tax return. It makes sense to itemize only if your total itemized deductions would exceed your standard deduction. In 2024, the standard deduction is $29,200 for married persons filing jointly, $21,900 for heads of household, and $14,600 for single filers. The standard deduction amounts for 2025 will be announced in late October.
Consider consolidating multiple years of donations into a single year so that you’ll be able to claim them as itemized deductions on your tax return. Take Matt and Jamie, for example. Instead of making a $20,000 charitable gift in 2023 (when the standard deduction for married couples filing jointly was $27,700) and again in 2024, Matt and Jamie decided to contribute $40,000 in 2024. That donation will exceed their current $29,200 standard deduction by $10,800, which means they will profit significantly from itemizing instead of taking the standard deduction on their 2024 tax return.
Currently, the IRS generally allows you to deduct up to 60% of your annual adjusted gross income (AGI) for donations of cash to IRS-qualified public charities. Deductions for contributions of long-term capital gain property (such as appreciated securities held longer than one year) are limited to 30% of AGI. Different limits may apply based on the type of property being donated and the type of entity it’s being donated to. Be sure to check with your tax preparer to determine what deduction you may qualify for.
If your charitable donations for a given year exceed your allowable deduction, you can deduct the excess over the next one to five tax years, subject to each year’s AGI limit.
Once you’ve reached age 70½, qualified charitable distributions (QCDs) allow you to donate IRA assets of up to $105,000 per year to charity and exclude the amount from your taxable income. A QCD must be made directly by the trustee of your IRA to an eligible charitable organization. If you’re married and you and your spouse are both at least 70½, each of you can use QCDs to exclude up to $105,000 per year, for a total of up to $210,000 per year. The QCD limit is indexed annually for inflation.
If you’re at least age 73, a QCD can count toward satisfying your required minimum distribution (RMD) for the year, provided certain rules are met.
Contact your EY Navigate financial planner for more on deducting charitable donations. Also, it’s always a good idea to consult with a tax professional about your specific situation. Sign up for the EY Navigate webinar, “Make giving part of your financial plan,” scheduled for December.